A joint-stock company is a type of company that is granted legal personality status from the moment it is established, and is commonly used for running businesses. The company’s share capital consists of the total contributions of its shareholders. Shares may be subject to public trading, providing an incentive to investors, who are needed for further business development. At the moment the company is formed, the shareholders may declare it to be a close company, meaning that shares can be transferred to any person but the current shareholders must have first refusal. At the moment of incorporation, shares may be issued in a number of different forms, including bearer stock, registered stock or preference stock.

Functions of a joint-stock company
The ultimate goal of all companies is to run a business and generate profit. A joint-stock company is a useful company type for attracting investors and additional funding, while in return the investor is given shares granting the right to receive dividends. Frequently, joint-stock companies grow into large corporations with significant capital. They are most commonly found in the financial services sector — credit institutions, banks, insurance companies and other payment and financial institutions are very often joint-stock companies. These businesses obviously require financial stability and plenty of available funds in case of necessity.

Advantages and disadvantages of a joint stock company
The advantage of such a company formation lies in the maximum liability limits. In principle, shareholders of a stock corporation are only liable up to the amount of their contribution to the company. So, if the company becomes insolvent, the creditors cannot claim damages or claim damages from the shareholders personally. Conversely, the company is not liable for the debts of its shareholders. The strict separation between the shareholders and the liabilities of the company is based on the principle of the legal entity.

Another benefit is the ability to raise the necessary funds to start a business. In the start-up phase, it can be difficult for a company to raise seed capital. However, if some business partners make an investment to achieve a single goal, the start-up plans are likely to be more realistic. The joint investment is now directly related to the joint profit sharing. So if the company makes a profit, the dividends should be paid out pro rata to each shareholder.

The duties and responsibilities of the management of a company are governed by applicable commercial law and the company's articles of incorporation. A stock corporation usually has a two-tier board of directors. While this helps to control decision-making in day-to-day business operations and prevent errors, a complicated governance structure can hamper the speed of decision-making at times when rapid response is required.

If you are planning to start a business in the form of a public company, we strongly recommend that you contact us in the first place. We will inform you comprehensively and in detail about tax planning options and the most efficient corporate structure for your company.

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